Distribution characteristics and prospects for CDM projects in China

Abstract

As the 2012 end of the first commitment period of the Kyoto Protocol is fast approaching, there is a strong realisation that the Clean Development Mechanism (CDM) projects have no doubt been playing an important role globally, particularly in promoting clean development in China. Consequently, the prospects for the CDM market in the post-Kyoto era are attracting a lot of attention, including from the developing countries. Based on a review of international and domestic sources, the paper analyses the progress in the development of CDM projects both globally and China. As at 2011, China has attracted the lion share of CDM investment with 45% of the world projects located in this country and they account for 63% of the global annual certified emission reductions under this mechanism. Due to the relative easiness of implementation, the main area of investment is new and renewable energy (representing 73% of China’s registered CDM projects). China’s fast economic development, open door investment policy, political stability, high educational and technological standards and reliable infrastructure are all encouraging the interest of foreign investors seeking to reduce their domestic carbon footprint. In order to facilitate the location of CDM projects, the Chinese government formulated a series of policies and regulations as well as establishing national coordinating groups for climate change, CDM Designated National Authorities and projects auditing boards, which are responsible for projects application, auditing and management.There are however large differences in the regional distribution of Chinese CDM projects, with certain areas of the country, such as its western regions, still in need of development opportunities. Provinces, such as Yunnan, Sichuan, Inner Mongolia, Hunan and Gansu (located in central and western China) are attracting more projects because of their rich hydro and wind resources while there are very few projects in the eastern already developed parts of the country. This trend is consistent with the CDM’s main goal to assist less developed regions to achieve a more sustainable development. Finally and most importantly, this study poses the question about the future prospects for the CDM market in a post-Kyoto world. While China has so far proven to be a success story, in most recent times the amount of investment has started to slow down in the lead to this uncertainty.